UPS Is Firing Its Biggest Customer -- And Wall Street Finally Understands Why

Core Viewpoint - UPS is undergoing a significant restructuring due to a planned reduction in deliveries for Amazon, which is expected to lead to a decline in revenue and necessitate changes in its delivery network [1][4]. Group 1: Financial Performance - In 2024, Amazon accounted for 11% of UPS's revenue but contributed between 20% and 25% of U.S. network volume, indicating a reliance on low-margin packages [4]. - UPS's revenue declined in the fourth quarter of 2025, but revenue per piece increased by 8.3%, reflecting a shift towards more profitable operations [7]. - The adjusted operating margin for the U.S. segment improved to 10.2% in Q4 2025, up from 10.1% in the previous year, despite costs related to grounding aircraft [7]. Group 2: Operational Changes - UPS plans to reduce Amazon volume by 1 million pieces per day in 2025 and another 1 million in 2026, aiming for a more economically viable business model [5]. - The company closed 93 buildings in the U.S. in 2025, consolidating its network and achieving $3.5 billion in cost savings [5]. - UPS eliminated 48,000 positions in 2025, with an additional 30,000 job cuts planned for 2026, resulting in a significant reduction in labor hours [6]. Group 3: Future Outlook - The company anticipates a challenging path ahead, with expected overall adjusted operating margin of 9.6% in 2026, down from 9.8% in 2025, due to revenue declines and restructuring costs [8].